Sunday, 27 April 2014


The prohibition to export raw mineral prod­ucts to be effective per 2014 was hard to realize as processing industry at home was still at minimum. The Ministry of Industry M.S. Hidayat it was estimated that mineral smelters at home were not ready to oper­ate by 2014. The Government sets target that 70% of smelters could be built in 2 years. Today 50% of smelters were running and some investors were in­vesting their capital.

Moratorium of export of raw mineral prod­ucts, according to the Minerba law was not easy to exercise as exporters had been doing it for decades. So it needs a long process to make the Law fully ef­fective as targeted by the Government.

The Minerba Law had its positive impact and added value on the domestic industry. Building of smelters needed enormous capital and the Govern­ment was calling out all stakeholders to invest their capital in this sector. The main hindrance to smelter building was power supply. So the Government was considering the proposal that investors built their own power plants for smelters,

Previously it was disclosed that there were al­ready 153 investors who were interested to invest in smelter building in Indonesia. They came from China, Hong Kong, Singapore and South Korea. It was re­ported that the Government of Japan expressed their grievances over prohibition of raw mining materials by the Indonesian Government as their processing in­dustry was running short of raw materials.

The Government wished that Japanese min­eral processing industry relocated their smelters to Indonesia whereby to put added value to the minery products. But it was presumable that Japan would not dare to bring .this case to WTO. So it was time to, relocate their investment to Indonesia. For example Singapore would collaborate with the Provincial Government of South Sumatra to build smelters in South Sumatra at the value of USD 400 million. The point was that na­tional companies must stop importing raw materials in large scale whereby it was regulated by Presiden­tial Decree that downstreaming of mineral industry be managed by the Ministry of industry.

However the Ministry of industry would still collaborate with the Ministry of Energy and Mineral Resources who had command over the raw materi­als. As reported, applications to build smelters kept increasing, including by join venture companies. Ap­plication for permit to build smelters was one or the pre requirements for holders of mining permits [IUP] to obtain export permit [SPE] from the Ministry of Trade to export raw ore materials.

Today there were already 36 IUP permit holders being given SPE export permit by the Ministry of Trade. Previously the companies already had rec­ommendation of the Ministry of ESDM as they had already passed clear and clean test which included many aspects such as research procedure, explora­tion and exploitation, having exercised technical fea­sibility test and had fulfilled economic and environ­mental requirements and administrative obligations i.e. paying financial obligations to the Government.

Meanwhile to fulfill electricity need for smelt­ers PT PLN and KADIN Indonesia had signed MoU to build powerhouses of 1,500 megawatt. The collabo­ration was on business to business basis. The 1,500 MW electricity would be sufficient to support 30 - 40 smelters in all of Indonesia.

So far the survey outcome of the Indone­sia Resources Mineral [IRESSJ mentioned that the downstreaming of mineral industry would promote investment growth to the amount of Rp 400 trillion. According to IRESS the downstreaming policy made investors set forth 185 proposal at the value of USD 25.5 billion or Rp300 trillion. Therefore the Govern­ment, House and the public must support this down-streaming concept and the Minerba law to be consis­tently run.

The beginning of downstreaming caused less­ened tax and royalty in the next 3 years at the value of Rp60 trillion - Rp100 trillion, but the shortage was small compared to the benefit of downstreaming. State's income would soar high in the next 3 years. If this downstreaming process was postponed, Indone­sia would be losing added value to the amount of Rp 268 billion from 2017 to 2023.

Export of raw ore materials carried out so far made national industry support to be clumsy. Besides Indonesia would be losing added value in vast amount and become a dependent nation. Export of raw mining materials had happened in 2008 - 2011. Export of bauxite ores came to 40 million tons, iron ores 13 million tons, nickel 33 million tons and copper 14 million tons.

While 80% of the iron and steel scrap imports Indonesia is still in control, import 500 thousand tons per year of raw materials alumina, and copper prod­uct imports 1.28 billion dollars in the same period. Through downstream mineral policy, the domestic in­dustry had a chance to catch up. Because the policy will complement the downstream supply chain hus­bandry national industry has a strong structure of the metal industry. The completeness of accelerating the process of industrialization.

With calculation as above, then the down­stream and coal policy is appropriate because it has both the intent and purpose to sustain the national economy in the long run. Thus the debate about the construction of the smelter from any viewpoint be­comes no longer valid and it is time to end. Better business operators for the sake of long-term thinking rather than short term. (SS)

Business New - April 14, 2014

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